On 13 January 2016, AMAFI published its Code of Best Practice for Euro PP Arrangers (AMAFI / 16-02). Prepared by a working group bringing together the main institutions operating as arrangers for euro private placement (Euro PP) deals, the code sets out best business practices for these institutions through a market standard that offers the assurance of high-quality professional services.
AMAFI hopes that the code will underline the key role played by arrangers in ensuring smooth and successful Euro PPs and offer certainty to borrowers and investors that opt to take part in a Euro PP deal by calling on the services of an arranger that has promised to follow the code. To date, 14 AMAFI members have committed themselves to applying the code (AMAFI / 16-03).

AMAFI also continues to participate in cross-market work aimed at promoting the development of the Euro PP market and notably in preparations for the second annual Euro PP conference on 29 March 2016.

Following publication by ESMA of implementing measures for the Market Abuse Regulation in the form of technical standards (AMAFI / 15-51), AMAFI identified a number of questions that were discussed with AMF staff at a meeting organised in December. The aim was to ensure that these issues were taken into account in the discussions currently being held by ESMA.
Meanwhile, the Treasury began an urgent consultation in mid-January on draft legislative amendments to the Monetary and Financial Code. These include changes to protection for whistleblowers, modifications to the Monetary and Financial Code to accommodate the provisions of the Market Abuse regulation, the extended scope of the administrative settlement procedure, a ban on advertising for certain particularly risky products and transposition into French law of various pieces of European financial legislation. In responding, AMAFI raised a number of questions, particularly about provisions for whistleblowers (AMAFI / 16-09).

The consultation also covered the new stance on double jeopardy in terms of criminal and administration penalties for market abuse, which was eagerly awaited following the Constitutional Council’s ruling of March 2015. In the end, after various options were raised during the many discussions on this topic, it was decided neither to assign arbitration to a special commission nor to establish specific legal definitions for what constitutes a breach (subject to administrative penalties) or an offence (subject to criminal penalties). Under the selected approach, the financial public prosecutor and the AMF would work together to decide, based on the evidence, whether to go down the administrative or criminal route. Such cooperation has always been recommended in this area, but in the event of disagreement, the public prosecutor would be responsible for making a final, non-appealable decision. AMAFI pointed out that the image-related issues raised by the swift punishment of market abuse meant that the public prosecutor should take on only cases that can be handled efficiently within timeframes compatible with orderly market operation.

AMAFI remains heavily involved in efforts to transpose the MiFID 2 framework into French law and prepare Level 3 tools (ESMA guidance and FAQs). Level 2 implementing measures, however, have yet to be published. While it now seems to have been unofficially decided that the framework’s entry into application needs to be put off by at least a year, the texts required for this remain to be adopted. Given all this, the transposition timetable established by France’s authorities is likely to be pushed back.

AMAFI took part in several meetings with the AMF, discussing questions of investor protection and reporting to the regulator. It is also in the process of crafting a response to the consultation paper published on 23 December by ESMA on its draft guidance for transaction reporting, order record keeping and clock synchronisation.

Identifying the target market

The obligation to identify a target market, as part of product governance covering the rights and obligations of producers and distributors of financial instruments, is a critical issue for affected institutions. It is vital that the discussions currently being conducted by ESMA to prepare Level 3 measures address a range of issues.

Although ESMA requires national authorities to maintain strict confidentiality regarding its work and is not planning to hold a public consultation, AMAFI nevertheless teamed up with sister associations in Germany, Italy and Poland to make a joint submission to ESMA and the Commission, while also keeping the AMF in the loop. On questions with such important consequences, interaction between regulators and stakeholders is critical, especially at a time when the Commission is launching its “Better Regulation” initiative. The joint contribution stressed the need to prioritise an approach that is proportionate to product complexity, to avoid unduly curtailing the options for distributing financial instruments to investors during a period when financing the economy is such a key concern for Europe.

On 30 September 2015, the European Commission published an action plan containing 20 measures designed to build a single market for capital in Europe. In connection with this, it issued a call for evidence on the cumulative impact of financial legislation as it sought to gather information and empirical data on rules that might compromise the economy’s capacity to finance itself and grow because of overlapping, inconsistent or unwanted regulatory provisions.
Based primarily around selected examples, AMAFI’s contribution (AMAFI / 16-08) also tackled the priorities that should guide the assessment of the European legislative framework, which include:

Striking a balance between protecting investors and financing the economy;

Considering diverse needs and solutions in market financing. In other words, the drive to harmonise should not interfere with the orderly operation of vital local ecosystems;

Revisiting the European legislative process to improve the standards that it produces.

AMAFI also said it was a great pity that this initiative had not been underpinned by an in-depth discussion over the right market model for Europe and noted the lack of ambition in the two legislative proposals presented by the Commission on securitisation and the revision of the Prospectus Directive.

Prospectus

On 30 November, the European Commission published a draft Prospectus Regulation that is intended to replace the 2003 directive. The proposal followed a consultation launched last spring as part of CMU (AMAFI / 15-27).

Relative to the expectations generated by the consultation’s open questions, some of the draft proposals, although heading in the right direction overall, are something of a let down. For example, while certain thresholds creating the obligation to prepare a prospectus, whether for an offering or an admission of securities to trading on a regulated market, have been significantly raised, giving Member States the option of raising this threshold to €10 million for domestic offerings reflects a regrettable lack of harmonisation. The proposal to introduce a universal registration document for frequent issuers is to be welcomed, although the fairly limited effects associated with this status are somewhat disappointing and an ex post review system was not proposed as had been suggested. Likewise, the determination to create specific regimes for secondary issues and SMEs is laudable, but the proposals on secondary issues fall well short of those put forward by AMAFI.

Meanwhile, the details of the streamlined prospectus for SMEs, which AMAFI naturally supports in principle, have still to be revealed in the delegated acts of the European Commission and forthcoming guidance from ESMA.